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Employee
June 1, 2019
Question

Where do I file the personal money I invested towards the start-up of my business in 2015, for my 2016 small business filing?

  • June 1, 2019
  • 6 replies
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6 replies

Employee
June 1, 2019
I'm assuming it wasn't a corporation.  What specifically was the money spent for?  You deduct or capitalize the expenses paid from the money, not the investment.
Employee
June 1, 2019
It is a single-entity LLC which I'm treating as a sole prop for tax purposes. I purchased equipment (many thousands of dollars) with my own money during the startup phase. Do I simply list this equipment as an asset and depreciate it over time? Also, do I treat personal money any differently on my return than money that was invested in my business *by others* to pay for startup costs?
Employee
June 1, 2019
Your money is just money you spent.  The deduction you get is the fact that you can expense it over 1 or 15 years.  If you sell the business before 15 years, the undepreciated startup costs count as part of your cost basis and reduce your capital gains.

Money other people invest is going to be more complicated, that would have to be recorded as partial ownership (in which case the LLC can't be a disregarded entity) or a a loan, in which case it is carried as an obligation on your balance sheet and you have to pay it back with interest.  The interest is a deductible expense but the principle is not.  The principle was not taxed as business income when you received the loan so its not deductible when you pay it back.
Employee
June 1, 2019
Thank you, Patricia. This answers the first half of the question, which I appreciate. The second half is about the origin of the money I spend. Do I report things differently if it was MY money versus money someone else gave me in support of my startup? Thank you.
Employee
June 1, 2019
OK, got it. Thank you so much!
Employee
June 1, 2019

Startup costs of up to $5000 can be expensed in the first year that the business is active, as long as the total startup costs are less than $50,000.  Startup costs over $5000 must be amortized over 15 years.  Here are some links to explain.

https://turbotax.intuit.com/tax-tools/tax-tips/Small-Business-Taxes/Startup-Business-Tax-Tips/INF277...

https://ttlc.intuit.com/questions/1932176-where-do-i-enter-cash-for-startup-costs

This old answer seems to cover it, 

https://ttlc.intuit.com/replies/5146525